What’s in store for property prices in 2024?
This time last year, the media was full of doom and gloom forecasts that home prices would plunge by 10% or more in 2023 as soaring interest rates weighed on buyer demand.
But the market proved to be more resilient than many expected, with CoreLogic’s national home value index growing 0.6% in March to break a 10-month streak of falls. Since then, national home prices have continued to climb, with October’s 0.9% monthly gain leaving them just shy of record levels.
That growth happened despite five interest rate rises from the Reserve Bank of Australia, which took the cash rate from 3.10% in December 2022 to 4.35% in November. Driving the rebound has been an ongoing imbalance between supply and demand, with the country not building anywhere near enough housing to meet demand.
Recent Australian Bureau of Statistics (ABS) data shows the country’s population grew by 2.2% in the year to March 2023, with overseas migration adding 454,400 people.
All these people need to live somewhere. But at the same time, residential construction has stalled, with ABS building approval numbers trending down to fall to decade lows in September.
The imbalance is not just a current issue but is rather projected to persist, with Housing Australia forecasting this to lead to a shortfall of more than 106,000 homes by 2027.
As such, the major banks all expect property price growth to continue, despite higher interest rates with:
Commonwealth Bank predicting 5% growth across the nation in 2024, with Sydney expected to see prices climb 4%
NAB expecting national house prices to rise by 5% next year, with Sydney’s prices up 5%
ANZ forecasting national house prices to rise by between 3 and 4%, with Sydney’s prices growing 4.0%
Westpac expecting national prices to grow 4%, with a 6% lift tipped for Sydney
What about interest rates?
Turning to the outlook for interest rates, many major economists currently expect these to come down next year with CommBank predicting the first cut to occur in September 2024, with the cash rate expected to fall to 2.85% by May 2025.
Westpac also expects a cut in September 2024, with the cash rate decreasing to 2.85% by December 2025. NAB is slightly more conservative, anticipating the next cut by August 2024, with the cash rate expected to reach 3.10% by March 2025.
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